Despite gains during the past three sessions, the direction of the U.S. stock market is still uncertain and very much dependent on a variety of macro issues. The biggest among them the U.S.-China trade dispute.
Investor hopes were lifted on this front on Friday when media reports surfaced that U.S. trade officials are debating scaling back tariffs on Chinese imports as a way to calm markets and give Beijing an incentive to make deeper concessions in resolving the trade battle. While this macro hurdle, along with a few others such as the ongoing, partial U.S. government shutdown, continue to pressure shares, earnings releases during the upcoming week could provide important signals for the health of some of the world’s largest companies.
Here are three high profile stocks to watch during the week as they each report quarterly earnings:
1. Procter & Gamble
Consumer staples giant Procter & Gamble (NYSE:PG) is scheduled to report its fiscal Q2 2019 earnings on Wednesday, January 23 before the market opens. Analysts on average expect earnings per share of $1.21, up from $1.19 a share a year ago. Sales for the same period are forecast to have fallen over one percent, to $17.14 billion.
Due to the defensive nature of P&G’s business, its shares have outperformed the benchmark S&P 500 Index over the past six months as investors cut their risky bets and moved cash into consumer non-discretionary stocks.
On the earnings front, investors will be looking for any evidence showing that P&G’s turnaround has begun to pay off and the packaged goods giant is able to sustain its momentum after delivering a positive surprise in the past quarter. Organic sales, which exclude items like acquisitions and currency effects, rose 4% in Q1, more than double the gain projected by analysts.
After being accused of being too big and too slow to adjust its product lines in an environment when smaller disruptive competitors who have begun to chip away at PG's market share, the company is focusing on 10 big product segments to help streamline the company's focus and profits. Defined by P&G as daily use categories, the list includes 65 brands that fall under the company's baby care, laundry and home care, and personal care divisions, described by the company as their faster-growing, higher margin businesses.
2. Intel
The world’s largest chip maker, Intel (NASDAQ:INTC) will report Q4 2018 earnings on Thursday, January 24 after the market close. Analysts on average are expecting $1.22 per share profit, up from $1.08 per share for the same period a year ago on sales of $19.01 billion.
When compared to its peers, Intel has outperformed. Shares of semiconductor competitors including Texas Instruments (NASDAQ:TXN ) and Nvidia (NASDAQ:NVDA) have all plummeted, as the environment for chip producers has weakened considerably, driven by a major slowdown from buyers. Though Intel's shares have fallen 5% in the past six months, Nvidia's stock plunged over 37%.
During the past quarter, Intel not only beat sales and earnings per share estimates, but also raised the company’s full-year guidance. It may surprise investors yet again on Thursday, on the strength of its product diversification.
Intel is the only chip stock we consider a buy right now. Selling at $49.19 per share as of Friday's close, it looks cheap after its recent pullback and well-positioned to outperform other players.
3. Starbucks
The global coffee chain, Starbucks (NASDAQ:SBUX) is another large cap stock set to report on Thursday after the market close. Analysts are predicting $0.65 EPS for Q1 on sales of $6.49 billion, hoping that the company will continue to maintain its rebound in comparable store sales, helped by its strong presence in the U.S. and its expansion in China.
One caveat we see in this generally upbeat outlook, however, is that most of the good news is already baked into the share price, which closed Friday at $64.70. The stock rallied to a record $68.98 after its quarterly beat during its last report in November and there isn’t much left in the short-run to push Starbucks higher unless Q1 numbers show a drastic turnaround.
The chances of a big positive surprise are slim though. Starbucks, like many food and drink sellers, is fighting a cyclical downturn, as consumers turn away from unhealthy drinks.
Still, its shares have strong appeal for investors seeking steadily growing income. This dividend stock has a yield of 2.24% and a very healthy payout ratio of about 42% over the past four years. As well, during the past three years, Starbucks delivered about 25 percent average dividend growth per share.
Any post-earnings weakness should be taken as an opportunity to buy this dividend stock.